Huge opportunities exist in India for the export of auto components to USA and Europe. These are among the best candidates to realise the Prime Minister’s Make in India dream.

From cost arbitrage to efficiency arbitrage – the SAF journey

Back IN 1990 Super Auto Forge realised that the only way for an auto component manufacturer to grow rapidly is to go for exports where volumes are very large. With USA making 16 million cars, SUVs and light trucks and Europe making 11 million of these, the obvious choice was to focus on these markets. It was the USA, which first opened its doors for imports from India. Initially US OEMs termed India as a ‘Low Cost Country (LCC) and their primary interest was the cost arbitrage. As years progressed, the capability of Indian manufacturers to supply more critical parts involving improved technology has become the main factor. It’s the efficiency arbitrage.

Super indeed!

Super Auto Forge P Ltd specialises in cold forging technology developed in-house. In its manufacturing plants spread over five locations in and around Chennai metro, SAF employs over 1200 workers. Several of the sophisticated high performance machine tools have been designed and fabricated in-house. During 2016-17 revenues are around Rs.500 crore with exports of Rs.300 crore.

The primary reasonS for this possibility are the high labour and other operating costs and non-availability of skilled blue-collar labour in the developed nations. But there are many challenges in tapping this potential: the stringent requirements of quality, cost and delivery.

1.Establish continuous supplies to original equipment manufacturers (OEMs) in India. This will help understand all expectations of the customer. The quality and delivery requirements of an Indian OEM are as stringent (if not more) as an overseas OEMs. This will make the vendor establish the necessary qua-

lity and production systems in place.

2.Create adequate additional capacity before entering the export business. The vendor cannot fail on deliveries as there won’t be a second chance, if defaulted once. Incidentally the higher the volumes, greater are the opportunities to contain costs and become globally competitive.

3.Target specific ‘product group,’ where the vendor’s strength lies; do not get tempted to quote for any and every part.

4.Develop patience for repeated ‘cold calls’ that may go unanswered. The whole exercise, including all approvals to enter an OEM, may take a couple of years.

5.The first few opportunities are extremely important: these will act as reference points for business with other customers. To be right on the first time is critical.

6.Once the Purchase Order is received it is essential to understand all the terms and conditions prior to accepting these. If there are harmful clauses, seek clarifications and remedies at the earliest. Straight talking and transparency in dealings are absolute musts in dealing with overseas customers.

7.Understand fully all customer quality expectations of the part, types of packaging and batch quantities.

8.Analyse in detail each and every process and go in for the most dependable process equipment or machines.

9.Choose a ‘Logistics partner,’ who can provide dependable and seamless end-to- end service.

10.While large volumes are tremendously advantageous, they come with the responsibility to deliver on time. Failure will entile huge costs.

Export of auto parts to OEMs overseas is an unlimited huge opportunity open to all those who have the perseverance and willingness to put in hard work in the early stages and sustain it through good systems and management practices.

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